The credit agency creates an assessment that many companies use as a basis for decision-making when it comes to loans with people. The Advocate General of the ECJ believes that this violates data protection.
The credit agency Schufa has to accept a setback before the European Court of Justice. According to an expert at the European Court of Justice (ECJ), scoring by Schufa violates European law. When scoring, the credit agency collects a lot of data about people, such as the number of checking accounts or credit cards, and uses this and a secret algorithm to assess whether people are creditworthy or not. The higher the Schufa score in points, the more likely it is for the credit agency that a person will pay back their bills and loans. If the score is particularly low, people often do not get a loan, an apartment or a mobile phone contract because the companies do not consider them creditworthy.
Advocate General Priit Pikamäe has now found the automatic creation of this score to be illegal in an expert opinion. The automated creation of a probability value, as Schufa does with its score today, is profiling within the meaning of the General Data Protection Regulation (GDPR), he says – and thus violates European law. The report is problematic for the Schufa. An Advocate General’s Opinion is not binding on the Court of Justice, but only a proposal for a decision. However, the court often follows the suggestion. A judgment is only expected in a few months.
The background to the report is, among other things, a case that the Administrative Court of Wiesbaden submitted to the ECJ to clarify the relationship with the European GDPR. This stipulates that decisions may not be made automatically if these decisions have a legal effect on a person. In the case of the Schufa score, the Advocate General saw exactly that. Since the Schufa score for creditworthiness plays an important role in everyday life and, for example, banks serve as a basis, the consumer may be at risk of being significantly impaired by automated creation, according to Advocate General Pikamäe. Even if banks and not Schufa ultimately decide whether to grant a loan.
The Schufa points out that the report is not a judgement, but writes on request: “We will examine the opinion and the possible implications.”